The problem determining “value” in value management and value chains
There is a lot of confusion about “value”. What in your enterprise contains your value? When you create value, where does the value go? Is value an attribute of performance, the customer, the proposition, the employee, the function, the strategy, the process, the system, a chain, the business, the corporation, management, or what? Can we manage value when we do not know what contains value?
There is a lot of talk about business collaboration in value chains across corporations. But, what comprises a link in a value chain? What are the components that define a link in your value chain? If we cannot define a link, how can we create a chain?
20th century structures manage results and value as outputs from the corporation
The 20th Century Corporation organizes and manages organization structures, monolithic business processes, separated information systems, and other structures laid over the business. Business processes lump capital, results, and performance together in a process. Business process management is not able to manage value, so we contrive formulas to calculate numbers called “value”.
Business process management and “Managing for Results” manage results as outputs from the corporation in final goods and services results that earn economic value and generate revenues. Value is determined from outside the corporation in the customer willingness to pay for final results in goods and services. Results within the business process are defined as performance. So, value within the corporation business process to produce the final result value can not be organized or managed.
21st century management manages value within the corporation
More and more attention is being paid to managing value within the corporation. Books are written on strategic value creation, value management, value propositions, and value chains. Structures are contrived for value management and value chain management by using formulas to calculate value within the corporation. But, in all this, has anyone precisely described where corporate value really lies?
21st century management requires one integrated structure to manage value across the business, know the cost of creating value, and to know the value added at any point.
Conventional business processes cannot manage value; processes must be replaced by result value-quality chains
Rule No. 2 for 21st Century Management is Generate Revenues from an Chain of Managed Value and Quality. How can we generate revenues from a chain of known value, when we employ business processes that do organize or manage value?
To know value, we must redefine business processes as result value-quality chains. We must organize the results produced and manage each result in the result value-quality chain starting from input results from the supplier, result value added along the corporate chain, and the final result to the customer that generates corporate revenues.
We must manage the chain across corporations to help suppliers meet corporate result needs, to collaborate with business partners within the chain, and to add more value by meeting customer value-quality chain needs.
There is only one way to do this. Use Result-performance Management (R-pM) to organize the business for 21st century management.
Result-performance Management (R-pM) is the only way to manage value creation and to link value chains
We cannot manage the value created in the business, if we do not use Result-performance Management (R-pM) to organize and manage the actual business. The business is defined by two entities:
- Results: The economic outputs from the business that actually contain the value created and are specifically organized to manage value. Value is an attribute of each result and is determined and managed as a routine management metric
- Performance Solutions: The capital consumed in performance to produce result value, which are organized specifically to manage consistent costs against the value to know value added
R-pM is the only way to manage value creation and link value chains, as introduced in the article “Build Business Collaboration in a True Value Chain with R-pM“.
R-pM is a breakthrough to build and manage real value chains
R-pM gives the corporation the breakthrough needed to manage consistently-defined costs incurred in performance and value created in results. Now any corporation can manage value and collaborate with business partners in workable and re-linkable result value-quality chains.
Learn more about Result-performance Management, the only way to organize the business as one integrated structure for 21st century management. The R-pM Toolkit provides the guidance needed and contains the valuable document “How to Build Result Value-quality Chains”.
